The IMF: A cure or disease?

15.07.2015

Source: Pravda.Ru photo archive

By Harun Yahya

The economy plays a vital role in determining the welfare of people's lives. The word "economy" may sound simple but its effect on people in terms of social, political, judicial and psychological aspects are tremendous. The family, the basic unit of society, aims to have a happy life with good social standards. Parents want to feed their children with the healthiest food, provide them with the best education and want to take them to the best doctors to have the best care when they are sick. In order to reach these targets, a family needs to have a certain amount of money and they have to work hard to increase their income.

When they are in hardship and lack sufficient means when they are in need, they start to make sacrifices; they decrease their spending and find ways to reduce their spending and increase their income. Countries are not much different than parents trying to please their children, only in this instance the number of the needs and expectations are incomparably higher. When governments cannot satisfy the needs of their citizens due to economic failures, they take their country to the doctor like parents taking their children to doctor looking for a cure. The doctor in this case is the IMF - the International Monetary Fund. Yet, it is debatable to say that they are obliged to appeal to the IMF as the only option for a resolution without seeking any other alternatives or if indeed the IMF gives them the right prescription or not.

As is known to all, the world was left in ruin after World War II. Global trade was in shambles and of all the participants, only the United States of America came out fairly unscathed. To overcome this and to rebuild a newer, healthier global economic system, 730 delegates from 44 countries gathered for the Bretton Woods Conference in New Hampshire, United States in July 1944, which is where the IMF was born. The institution became operational in one year after the agreement was ratified by an adequate number of countries. The Bretton Woods System first rested on both the gold standard and the US dollar until the US put an end to the convertibility of the US Dollar to gold, thus rendering the US Dollar as the reserve currency used by many states. This change in the system is known in history as the Nixon Shock.

On its official website the IMF defines itself as "an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world." By looking at this definition, it is presented as a benevolent organization that helps the poor; however, there is - as always - more than meets the eye. That is the reason the IMF has always been on the spot, and is the subject of a good deal of criticism from all over the world. Many economists believe its duty ended with the Nixon Shock and it should have been closed shortly thereafter.

Additionally, many books and articles have been written and many documentaries have been broadcast to criticize this institution; Confessions of an Economic Hitman by John Perkins is one such book. In another book called the Routledge Handbook of Comparative Political Institutions, Pakistan is given as an example who received a generous loan package from the IMF in 2001 when the US needed military bases from which to stage a war on terror against Afghanistan. Moreover, some believe once a country signs a stand-by agreement with the IMF, then their economy, which is already in a profound recession by that point, will not survive the austerity measures and never be out of the woods as a result. They base their claims on some solid cases: For example, many African countries used to have a sustainable economy from 1945 to 1980 but when the IMF got involved, their economies commenced on a downwards trajectory. Another country which went into recession, even after fulfilling all the prescribed austerity measures, was Argentina.

Comparatively, Greece also got worse after its bailout program with the IMF but it is on the other hand a rather unique case with its debt to GDP ratio and lacking its own sovereign currency which with to devalue as a remedy. It is economic deterioration that makes countries knock on the IMF's door and then the IMF gives them loans under very harsh conditions called austerity measures which cause anger, psychological depression and unemployment.

For instance, the rate of youth unemployment in Greece has skyrocketed and currently stands at 50%; since the young are more prone to stand up for their rights and make their voices heard, they pour into the streets in protest. It is deeply regrettable to note that after the beginning of the economic crisis in Greece, the number of suicides have increased by 35 percent over the last two years. Greek PM Tsipras staged a referendum to allow the Greek people to decide their own future and they said 'no' to further austerity measures. It is unreasonable to expect everything from an institution, be it the IMF or any other creditor, since they do not have a magic wand to make everything right again. The world is a place of trial and we are determined to gain everything through endeavor, effort and sacrifice. Now it is the Greek people's turn to take action and they will do all they can to revive their economy to return to the standard of living they enjoyed not long ago.

On the other hand, I can cite Turkey as an example who went through some very tough austerity measures imposed by the IMF but later rose to its feet and moved forward. Turkey paid its final debt to IMF in 2008 and now acts as a member state which is in the position of giving loans to those countries in financial need. As we can see, it is not impossible to reverse the situation through love, patience, effort and hard work.

I'm not here to criticize the IMF or any other monetary institutions that try to stabilize the world economy because it is wrong to sit back and expect an institution do everything on our behalf. Besides, economic growth is not a real indicator either; as John Perkins puts it, "...helping an economy grow only makes those few people who sit atop the pyramid even richer, while it does nothing for those at the bottom except to push them even lower." In order to have a healthy society, it is important have social justice. The most important aspect in this regard is to love and care for one another.

If the money is not hoarded by the rich and is instead distributed throughout society, the economy will revive which will put an end to a recession, increase productivity and reduce unemployment. Thus, the people in need will be taken care of and the poor will be able participate in the cycle by contributing to the economy. This will turn the world into a peaceful, loving environment with no need to struggle for survival.

Harun Yahya

The writer has authored more than 300 books translated in 73 languages on politics, religion and science. He may be followed at @Harun_Yahya and www.harunyahya.com